State and Local Impact of Raising the Minimum Wage to $15 in Massachusetts

By Nicole Rodriguez, September 18, 2017

State-and-Local-Impact-of-Raising-the-Minimum-Wage-to-$15-in-MassachusettsUpdated September 2017 (originally published August 2016)

By Nicole Rodriguez

While hard work is considered the ticket to a middle-class life, many
full-time workers across the Commonwealth struggle to support
themselves and their families. In an attempt to increase economic
security, Massachusetts phased in an increase in the state’s
minimum wage to $11 an hour in 2017. This is a significant increase,
but a minimum wage worker who works full-time at 40 hours a week for 52
weeks a year would still only earn about $22,880 per year.

Many cities and a few states like California and New York have already
passed $15 minimum wage laws to help raise the living standards of low
and middle-income families.1
In 2015, Governor Baker
negotiated a $15 minimum wage for Medicaid-funded home care workers in
Massachusetts.2
Beth Israel Deaconess Medical Center, Boston
Medical Center, and Tufts Medical Center have also agreed to a $15 wage
floor.3

In light of this growing national trend and statewide attention to
increasing the minimum wage to $15 an hour, this brief looks at the
state and local impact of a $15 minimum wage if it were phased in at a
rate of $1 per year from 2019 until 2022 - the same way that the
Commonwealth increased the minimum wage from $8 to $11.

Statewide Impact
of a
Minimum Wage Increase

Projections show that increasing the minimum wage to $15 by
2022 would
raise the wages of roughly 943,000 workers or 29 percent of our
workforce statewide. Of these affected workers, 90 percent are adults
(over 20 years old), 56 percent are women, and 55 percent work
full-time.

Increasing the minimum wage to $15 by 2022 is also projected
to raise
the wages of 24 percent of all working parents. And 26 percent of all
kids in the Commonwealth live in households that would benefit from the
increase.

Increasing the minimum wage to $15 an hour would raise the earnings of
significant shares of workers from both low- and middle-income
families. Minimum wage increases affect workers both directly, when the
new minimum is higher than workers’ current wage, and
indirectly, when workers’ wages at the time of the increase
are a little above the new minimum and are pushed up by spillover or
“ripple” effects as a result of employers
maintaining some progression in their internal pay scales.4
For instance, 60 percent of workers with family incomes below
$15,000 would get a raise (46 percent directly and 14 percent
indirectly) as would over one-third of workers with family incomes
between $50,000 and $75,000 (23 percent directly and 13 percent
indirectly). While it may be surprising that so many middle-income
families would benefit from a $15 minimum wage, there are many
two-parent families with incomes between $50,000 and $75,000, where one
parent is making at or about the minimum wage and the other is making a
little bit more. Raising the minimum wage to $15 would raise the
incomes of these families as well as significant numbers of low-income
households.

Local Impact of a Minimum Wage Increase

The table below shows the
portion of wage earners and the total number of workers by region who would be
affected directly or indirectly by an increase by 2022 in the minimum
wage to $15 per hour. Directly affected workers are those
with wages below $15 who would receive a pay increase. Indirectly
affected workers are those who earn slightly above $15 whose wages
would increase somewhat as pay scales rise in response to the minimum
wage increase.

Specifically, the table shows that workers in every region of the state
would be affected by an increase in the minimum wage. For example, in
Gateway Cities like Lawrence, Haverhill, Methuen, and Worcester, about
40 percent of workers are estimated to see their wages rise if
the minimum wage is increased to $15 per hour. Overall, projections
show that at least 15 percent of workers in every region of
Massachusetts would see their wages rise from a minimum wage increase.

Notes on Methodology

The local projections contained in this fact sheet come from a model
developed by the Economic Policy Institute, a national, non-partisan
research organization. The model uses data from 3-year pooled American
Community Survey (ACS) microdata from the U.S. Census Bureau,
2013–2015, and looks at specific geographic areas called
Public Use Microdata Areas (PUMAs)—areas that are large
enough so that the sample size used in the survey is sufficient to
produce reliable estimates. The total estimated workers figure is
estimated from ACS respondents who were 16 years old or older,
employed, but not self-employed, and for whom a valid hourly wage can
be imputed from annual wage earnings, usual hours worked per week, and
weeks worked in the previous year. All government workers are excluded
except those that work for "local government.” Projections
assume annual population growth and wage growth. Identification of
workers is based on place of work and not residence.

The analysis also assumes that an increase in the minimum wage
to $15
per hour will have two types of effects. First, workers who earn less
than $15 per hour would be directly affected by the change because they
would receive an automatic pay increase when the new minimum wage goes
into effect. Second, although harder to discern, other workers earning
slightly above $15 per hour would tend to benefit indirectly because
their wages can be expected to increase somewhat as overall pay scales
rise in response to the minimum wage increase. Specifically, indirectly
affected workers are those with reported wages just above the new
estimated minimum wage (between the new minimum wage and 115 percent of
the new minimum).

4 Estimates of
workers affected by a minimum wage increase to $15 in Massachusetts
include both directly and indirectly affected workers, unless otherwise
noted. Labor economists have examined the issue of indirect wage
effects of raising the minimum wage. For instance, Wicks-Lim
finds that indirect effects typically result in wage increases for
workers further up the wage ladder because employers want to maintain
some progression in their internal pay scales. Also, Dube, Giuliano, and Leonard
similarly find positive indirect wage effects for workers earning 15
percent above newly implemented minimum wages. The data on affected
workers in this report comes from the Economic Policy Institute, and
reflects the research of Wicks-Lim, Dube, et al. For further detail,
see the methodological appendix in the Economic Policy Institute 2017
report “Raising the minimum wage to $15 by 2024 would lift wages for 41 million American workers."

This research was funded in part by the Annie E. Casey Foundation. We thank them for their support but acknowledge that the findings and conclusions presented in this report are those of MassBudget alone, and do not necessarily reflect the opinions of the Foundation.

Massachusetts Budget and Policy Center

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